AUD/USD Potential for Deeper Move Keeps Door Open for Bears

2017-11-09 15:29:00

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This is an addition to the Analyst Pick from a few weeks ago when we looked at the short-side of AUD/USD. With that position having hit its first target, also allowing for a break-even stop move, the potential for a deeper bearish turn can open the door to fresh short-side positions. This is driven by the prospect for a continuation of USD-strength as the Greenback continues to find buyers at higher-low levels of support.

After our prior Analyst Pick, Aussie turned lower and came ~15 pips from hitting our second target. But since then, a range has developed as buyers have showed-up around the .7630 area on the chart. But throughout this period, sellers have remained active, responding to those moves-higher to give us a series of lower-highs throughout the month of November.

AUD/USD Hourly: Mean Reversion After Bearish Break, Recent Lower-Highs in November

Chart prepared by James Stanley

Stops on the position can be set above the psychological level of .7750 in the effort of putting risk levels outside of the batch of recent resistance. If we do take out the .7750 level, the prospect of bearish continuation will look considerably less likely and thus, this can serve as an excellent invalidation area for the setup. This would be approximately 90 pips of risk with current levels, and this can open up the possibility of initial profit targets at .7561, which can also be an ideal area to investigate for a break-even stop move. If this is taken-out, the psychological level at .7500 is exposed, and after that we have another Fibonacci level that can function as a third target around .7389.

AUD/USD Four-Hour: Bigger-Picture Breakdown Potential Exposes .7500 Psychological Level